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06/15/2012

Capital expenditure plans for regional firms

We recently reached out to our regional business contacts to gauge their intentions regarding capital expenditures. The results of our regional survey showed that over half plan to increase capital spending over the next six to 12 months. Only 14 percent anticipate decreasing spending from current levels.

Of the businesses that planned to increase spending in the near term, high expected growth of sales and the need to replace information-technology equipment were the two most common factors driving their plans. Firms that commented in the "other factors" category cited expansions as reasons for increasing spending now. Decreased economic/financial uncertainty was the least cited factor.

Among the businesses that said they do not plan to increase spending in the near term, firms cited increased or high economic/financial uncertainty, limited need to replace capital goods, and low expected growth of sales as the major factors behind not increasing capital spending.

Indications are that the broader regional economy continues to grow at a modest pace, and the results from our recent capital expenditure poll appear to support that conclusion. Firms continue to invest, driven largely by expectations for improved sales. Those that have chosen to hold off noted that uncertainty is the main factor, so if the future becomes less cloudy we might expect further increases in capital spending.

By Mike Chriszt, a vice president in the Atlanta Fed's research department

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